By Paul Homewood
h/t Ian Magness
BP has taken an enormous risk by betting the farm on booming global demand for oil and gas as far out as the late 2030s, and retreating drastically from renewables and clean-tech investment.
The International Energy Agency (IEA) warns that the world is heading for the largest glut of excess oil supply ever seen, with a fall in the structural price of crude to match. If the IEA is right, BP is condemning itself to a death spiral in a Faustian pursuit of quick profit.
The company has switched almost overnight from the green darling of the European “majors” to arch-villain under the back-to-basics strategy of Murray Auchincloss. It is slashing its plan for renewable projects by 72 petajoules of energy by 2030.
The IEA said in its mid-term outlook that global oil demand will peak in 2029 at under 106 million barrels a day (b/d) and then go into decline. Yet projects already planned or in the works or will push supply capacity to almost 114 million b/d.
“Barring the pandemic, this spare capacity is unprecedented. Oil companies may want to make sure their business strategies and plans are prepared,” said Fatih Birol, the IEA’s director. Marginal fields in the North Sea have little future in this scenario, with or without new licences.
BP is hurling itself against these powerful headwinds. It is not a short-term strategy intended to “max out” what remains of the post-Covid boomlet, or to fill the hole in world gas supply left by the loss of Russian pipeline exports to Europe. The investment will be concentrated in later years, funding ventures that will not produce hydrocarbons until the 2030s.
Bluebell Capital Partners and other powerful shareholders have been demanding a return to the core business of drilling. But cutting out the green crap – to borrow a phrase – reduces BP to a bit player in the biggest economic growth story of our age.
Clean tech is now attracting $1.8 trillion a year of eager money from hedge funds, private equity, and the wealth industry, dwarfing the oil and gas drillers three times over.
https://www.telegraph.co.uk/business/2024/07/12/just-stop-oil-bp/
.
The rest of the article is the usual AEP away in fairy land fantasy.
Personally I would sooner believe the decision makers at BP, Shell and all the other oil companies who are taking the same approach, than AEP who has been proven wrong year after year after year.
As for the IEA, does not AEP know that they are merely the mouthpiece for western governments, not the energy experts he seems to think?
AEP himself was issuing the same warnings back in 2016:
The Opec cartel is taking a brave bet that global oil demand will keep rising fast for another 25 years, convinced that fossil fuels will retain their overwhelming dominance over world energy deep into the 21st century.
The Gulf-led group has based its strategic planning on assumptions that the Paris climate accords that came into force last week will largely fail.
It brushes aside warnings that fast-moving technology for electric vehicles and power storage may soon transform the energy landscape beyond recognition.
The group’s 2016 World Oil Outlook released today estimates that crude demand will rise by a further 16.4m barrels per day (b/d) to over 109m b/d by 2040, driven by economic booms in China, India, and the emerging economies.
.
Well so far that decision has paid huge dividends:
BP Energy Review
Since 2015, consumption of oil and gas has increased by 8% and 15% respectively. Crude demand has risen from 93 to 100m barrels/day. Meanwhile demand for EVs remains painfully low.
As for AEP’s wonderful power storage, we are still waiting! The upshot is that demand for fossil fuels will remain strong for the foreseeable future.
Surely even he must realise by now that renewable technology simply is not commercially viable without massive government subsidies and mandates. We have seen how offshore wind projects have been cancelled because they are not viable, and EV makers cutting back because the demand is not there.
And would any business be prepared to invest billions on the hope that these subsidies and mandates won’t suddenly be cancelled on a whim?
Moreover we have seen the global economic dislocation caused when oil and gas prices spiked in the run up to the war in Ukraine. This was of course the result of a temporary and small interruption in supply. AEP’s policies would make that look like a walk in the park.
If BP and other oil businesses walked away from new investment, as AEP wishes, oil and gas output in a few years time would be severely impacted, as older fields wound down. Prices would rocket and the global economy would crash.
And any oil companies still in business will make a fortune.